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JC - Legal Updates - S. 8(2) IBC: Pre existing dispute has to be real and decipherable from reply issued to operational creditor

Legal Updates

06 Dec 2021

S. 8(2) IBC: Pre existing dispute has to be real and decipherable from reply issued to operational creditor

The pre-existing dispute which may be ground to thwart an application under Section 9 of the I&B Code, 2016 (“Code”)has to be a real dispute, a conflict or controversy. Such conflict of claims or rights should be apparent from the reply to Demand Notice as contemplated by Section 8(2) of the Code. Essentially meaning that the Corporate Debtor is not to raise bogie of disputes but there has to be a real substantial dispute.

This has been held by the NCLAT, New Delhi vide its judgment dated 17th November 2021 in the matter of Henan Boom Gelatin Co. Ltd. vs. Sunil Healthcare Limited.

The Appellate Tribunal further observed that there is a statutory purpose for requiring a Corporate Debtor to bring into notice of the Operational Creditor about the existence of a dispute in its reply to demand notice so that latter may chart course of action accordingly. Failure to state the same, affords a right to the Operational Creditor to immediately file an application under Section 9 of the Code. In other words, the existence of dispute when the Demand Notice was issued is a mandatory condition for exercising jurisdiction to reject the application by the Adjudicating Authority as is referred to in Section 9(5) of the Code.


For any further information, please contact Mr. Shubhabrata Chakraborti (shubhabrata.chakraborti@jclex.com) or Mr. Dhruv Malik (dhruv.malik@jclex.com).